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The Unified patent court and unitary patent - Brexit and beyond

In this introductory article we discuss the situation the proposed new Unified Patent Court and unitary patent system finds itself in with Brexit approaching. We outline the main aspects of the new system and how these may be affected by Brexit. We will shortly be producing a new UPC and UP hub on our website with more detailed guidance on the new system and how to navigate it.

Consistent progress has been made towards the establishment of a unitary patent right (UP) across most countries in the EU. 26 of the 28 European Union Member States (MSs) have participated in the enhanced cooperation needed to establish this new right, which will be enforceable via a new court system: the Unified Patent Court (UPC). The UPC will provide an exclusive court for all decisions involving the UP and also, in the longer term, all European patents. In the short term, current European patents will also fall within the UPC's jurisdiction, unless opted out.

However, the UK's decision to leave the EU will mean that its participation in the UPC is unlikely if not impossible (under the current drafting of the UPC Agreement) and that it cannot continue to take part in the new UP system. This is likely to delay the establishment of the UPC/UP system within the EU as, under the current drafting of the UPC Agreement, the UK is one of three MSs whose ratification is mandatory. Discussions are taking place as to whether the UK can be included even if no longer an EU MS. A Counsel's Opinion sought by representative UK IP bodies (in which Herbert Smith Freehills was involved) has been published (see below).

If the UK cannot take part in the UPC, it will become one of the European jurisdictions where separate patent protection will need to continue to be sought following the introduction of the new UPC/UP system, as will be the case in Spain and Croatia (and Poland which participated in the enhanced cooperation to establish the UP but has declared it will not ratify the UPC Agreement so there will be no means of enforcement of UPs in Poland).

Regulation 1257/2012 establishing the UP is already in force but the UP cannot become effective until the UPC has been established. The Preparatory Committee for the UPC had previously expected this to be in the early part of 2017 but this has been thrown into doubt since it cannot commence without the UPC being established and, on the current drafting of the UPC Agreement, this requires the UK to ratify the Agreement, which seems unlikely at the current time.

The UPC was created using an international agreement: the Agreement on a Unified Patent Court (UPCA), made between EU MSs, signed but not yet ratified by sufficient of them to come into effect. Poland has said it will not sign the UPCA, although it did take part in the enhanced cooperation to establish the unitary patent (but without signature of the UPC, the UP cannot have effect in Poland). Only EU MSs are allowed to be part of the UPC and the three MSs with the highest number of patent filings at the date the agreement was signed are required to have ratified the Agreement (along with sufficient other states to make 13 of more radiations in total) before it (and the Court itself) can come into effect. Currently France and 10 other MSs have ratified but not Germany, and not the UK.

Counsel's Opinion on the UK's participation in the UPCA Shortly after the Brexit referendum, the Intellectual Property Lawyers Association (IPLA), of which we are a member, along with other IP representative groups, jointly requested an Opinion from counsel Richard Gordon QC and Tom Pascoe of Brick Court Chambers on specific questions concerning the impact of Brexit on the UK's participation in the UPC. This Opinion has now been made public – see here. For a summary of the Opinion and commentary on it see our article here. Although this Opinion presents the theoretical possibility of the UK being part of the UP/UPC system post Brexit, it is difficult to see how this would work politically as the agreement would need to be reopened and the UK Government would be required to recognise the primacy of EU law and the jurisdiction of the CJEU in matters covered by the agreement. Even if these barriers could

Once the UPCA and the UP are both in force, then any European patent (EP) application coming to grant can be converted into a UP at grant if the applicant choses.

Currently, EPs are applied for centrally, at the European Patent Office (EPO), and then on grant are converted into a bundle of national patent rights, designated to whichever European Patent Convention signatory states have been selected by the applicant. Although there is a central system for opposition before the EPO, post grant infringement and revocation actions must be brought in relation to individual designations and cannot be litigated centrally. This frequently leads to multiple actions across Europe in relation to EPs derived from the same initial application.

The Commission and the European Parliament have sought to resolve the multiplicity of actions based on the same EP, by allowing the new UPC to hear EP litigation as well. However, for a transitional period, the proprietor of an EP may choose to "opt-out" of the UPC system and retain the right to litigate designations separately in national courts. Once this period has passed (after 7 years, although this may be extended to 14 years), all EPs which have not been opted out will be litigated "centrally" using the UPC system. For more on the consequences of opting out or not doing so see the section on opt-out below and our article for Managing Intellectual Property here.

It will not be obligatory to apply for UP status on grant of an EP by the EPO, EPs will continue to be granted as now. Once the new regime is in place, it will still be possible (as it is now) to apply for national patents (NPs) instead of EPs (or UPs) by lodging separate applications at each of the national patent offices. These national patents will not be litigated at the UPC and actions relating to them will continue to be heard by national courts. National patents are therefore one way of avoiding the new UPC system if there are strategic reasons for doing so.

Non-EU EPC states (such as Switzerland, Norway and Turkey) were not allowed to take part in the UPCA (only EU MSs could take part) and thus for patent protection in these states and any MSs which have not signed up to the UP or UPCA, the only option for protection will continue to be via an EP (or an NP). See below for more on where UP will have effect.

The UPC structure will have local divisions, regional divisions and a central division. Regional divisions are a form of local division providing a UPC for several MSs at once where the number of patent cases a year is too low to merit individual local divisions. Infringement actions can be brought in a local division but the central division has exclusive jurisdiction to decide applications for declarations of non-infringement and revocation (see the section on UPC structure below).

The central division has been split between Paris (the main seat of the central division), London and Munich. Each seat of the central division will deal with cases dependent on their content, based on IPC classifications. The London central division will take cases on patents involving human necessities and pharmaceuticals/chemistry including genetic engineering and Metallurgy (International Patent Classification of WIPO sections (A) and (C)). Munich will hear cases involving patents in IPC class F, concerning mechanical engineering. All other patent classifications will fall to be heard before the Paris central division. However, if the UK is no longer to be a part of the UPC system, the third seat is likely to move to a participating MS, most likely Italy, which would be the next state with the most filings after the UK.

For major articles we have written on the advent of the unitary patent and UPC see below:

We published an article on the impact of the UP and the UPC on the management of patent applications, patent portfolios in general and licensing in particular in PLC Magazine's November 2015 edition"The New Unitary Patent Regime – Prepare and Protect your Portfolio" available as a pdf from this link and also on Practical Law at http://uk.practicallaw.com/3-619-5858

The article considers, in particular:

the law applicable to UPs and the impact on this of the place of business of the applicants and the order in which they are named on the patent

issues for co-owners and co-ownership agreements (including opt-out considerations and control over proceedings, conversion of EP applications to UPs)

licensing – opt-out (both from a licensee and licensor point of view), control of proceedings

impact on patent valuation and security of opting out or not and of obtaining unitary protection

In June 2015 we published an article in Managing Intellectual Property Magazine "What should influence your decision to opt-out of the UPC?" discussing European, unitary and national patent registration strategies in the context of the option to opt-out European patents from the Unified Patent Court's jurisdiction.

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